Jamestown has decided to enter into a capital lease for the purchase of its new recycling truck. The capitalizable cost of the capital asset is $175,000 and Jamestown made a $30,000 down payment at the inception of the lease agreement. The estimated useful life of the truck is ten years with $0 salvage value. Which of the following statements is false?

Question

Quizplus · Accepted Answer

General Fund fund balance will be reduced by the amount of the down payment ($30,000) at the inception of the lease, not by the full capitalizable cost of the asset ($175,000). The rest of the lease amount would typically be recognized in the government-wide financial statements, not directly reducing the General Fund fund balance.

Jamestown Has Decided to Enter into a Capital Lease for the Purchase